Ghani Glass Limited (PSX: GHGL) was established in 1992 as a limited liability company under the Companies Ordinance 1984 and is part of the Ghani Group.
GHGL is engaged in the business of manufacturing Float Glass and Glass containers. It has several types of offerings in each category catering to a wide variety of clients. Float glass is a flat and crystal clear glass, free from bubbles or layers. GHGL primarily supplies float glass to architects, builders and designers customized to their needs and requirements.
Glass containers, on the other hand, are supplied to pharmaceutical companies and food and beverage companies. Some of the company's well-known clients include GloxoSmithKline (GSK), Getz Pharma, Reckitt Benckiser, Abbott, Pepsi, CocaCola, Unilever and Nestle among many others. As per the company's annual report, Ghani Glass Limited is the leader in the domestic market, dominating the pharmaceutical category by owning 86 percent of the market share, 76 percent of food and beverages category and 82 percent of float glass category. On the international front, GHGL exports to about 29 countries including South Korea, UAE, India, Turkey, etc.
Shareholding pattern
Majority of the company is owned by the directors, CEO, their spouses and minor children at 60 percent, while 25 percent of the shares are hold by the local general public. The 'others' category own about 14 percent and the remaining 1 percent is distributed between the rest of the categories.
Historical performance With the exception of FY14,GHGL's top-line has increased through the years. Profitability seems to have peaked in FY17 after which it followed a downward trend.
The fall in revenue during FY14 was because the company faced competition in the local industry. However, it must be noted that the decline was only about 2 percent year on year. Despite the decrease in top-line, the company was able to increase gross margins by undertaking Cost Reduction Programs (CRPs). This can be seen by cost of production declining as a percentage of revenue from about 78 percent in FY13 to 76 percent in FY14. The cost increase in other areas was offset by income earned from profit share of associate of Rs 158 million in FY14 compared to Rs 41 million in FY13.
In FY15, Ghani Glass Limited merged with Techno Glass Industries Limited. The top-line grew by 10 percent year on year while profit margins took off remarkably. Sales returns and trade discounts were lower compared to the preceding year which resulted in higher top-line for the year.
The upward trend of top-line and profitability stayed in FY16, with revenue increasing by about 5 percent year on year, with local sales mostly dominating the total revenue. In addition, GHGL paid off all short and long term bank financing during the period. Moreover, the company added to its overall capacity by installing a new Amber Pharma Glass Furnace at their Landhi plant in Karachi in addition to maintaining and upgrading the existing plants.
The year FY17 saw an increase in net revenue by 12 percent year on year. Profit margins also followed a similar trend due to production efficiencies, resulting in lower costs. This is evident by costs making 67 percent of the revenue, the lowest share recorded since FY12. Moreover, the production capacity for the year declined due to closure of furnace F-4 at Karachi plant while GHGL issued 90 percent rights issue for the purpose of financing a new float line. The latter has the production capacity of 450 tons which can also be extended to 500 tons per day.
Post FY17, profitability declined despite a rising top-line. The latter increased by 7 percent in FY18 on the back of growth in the domestic market while costs as a percentage of revenue increased from 67 percent in FY17 to almost 72 percent in FY18. The company was also operating at about 75 percent capacity.
Furthermore, since paying off all short and long term bank debts in FY16, the company was operating at debt-free financial status, thereby improving its shareholder value. Moreover, installation of the new float line in their Lahore facility was completed and it began commercial production in FY18.
During FY19, the company experienced the highest increase in top-line at almost 22 percent year on year. While bottom-line increased in value year on year, it was not able to command an increase in margin terms due to rise in cost of production as a percentage of sales, at almost 75 percent of revenue; travelling and conveyance expenses nearly doubled during FY19. Although FY19 experienced trying times for the economy, the company's financial performance was commendable.
Quarterly performance and future outlook The year 2019 saw a challenging environment with reduction in business activity especially the construction industry. Although revenue for the first quarter of FY20 increased by 42 percent compared to last year, the fall in business activity resulted in high inventory which posed a challenge for the company.
The company foresees challenging period due to high inflation, rupee devaluation and increasing energy costs. However, it expects growth further down the lane once economic stability sets in. With constant addition to capacity and upgrading and maintaining their facilities, the company hopes to maintain their market share and customer confidence and satisfaction.
================================================================= GHGL: Pattern of shareholding as at June 30,2019 ================================================================= Categories of shareholders % ================================================================= Directors, CEO, their spouses and minor children 60.095 Associated companies, undertakings and related parties 0.0333 NIT & ICP 0.6856 Banks, DFIs, NBFIs, insurance companies, takaful, modarabas and mutual funds 0.0001 Modarabas and mutual funds 0.0296 General public: Local 25.4203 Foreign 0.0013 Others 14.039 ================================================================= Total 100 =================================================================
Source: Company accounts
================================================================== Rs (mn) 1QFY20 1QFY19 YoY ================================================================== Net revenue- LHS 4,312 3,028 42.40% Cost of sales (3,260) (2,064) 57.95% Gross profit 1,052 964 9.13% General and administrative expenses (194) (128) 51.56% Selling and distribution expenses (232) (181) 28.18% Other operating expenses (47) (44) 6.82% Other operating income 22 7 214.29% Operating profit 601 618 -2.75% Finance cost (3) (2) 50.00% Share of profit/(loss) of associate 43 (25) -272.00% Profit before taxation 641 591 8.46% Taxation (61) (89) -31.46% Profit after taxation 580 502 15.54% EPS 1.07 0.93 15.05% ==================================================================
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